I’m not a fan of Xiaomi but, at one level, it’s been interesting to witness the system of activities the company has assembled to help it compete. (Though with minimal profit, I would add.) And I’m always curious to hear how different leaders speak about competing.

We’ll need to try our best to be successful in a few emerging markets in a big way. […] Our business model isn’t about how many phones we sell. We can’t monetize unless we become a highly influential player in a country or a region. […] we want to sell to 10% to 20% of the population in India and other big countries. Then we’ll have the influence of a huge media organization and the opportunity to monetize in various ways. […]

China’s smartphone industry is in elimination games now. […] It’s unbelievable that there are still a few dozen phone companies in China now. […]

In the past you made a phone, hoping to sell it to billions of users in the world. Now you can’t think in this way. You’ll have to design different phones for different crowds in different scenarios. […]

Almost all our users are young, so we might have influence on 20% to 25% of the young population. They watch TV, listen to music and read books and news. Xiaomi provides all of these. Doesn’t this make Xiaomi a huge content channel? Each day, our users use their phone 115 times and spend four and half hours on their phones. Just imagine what a powerful broadcast platform I have!

It’s thought-provoking to hear Lei Jun speak about Xiaomi’s business model. Note, however, that we hear about Xiaomi’s success in smartphones, but we don’t really hear about any sort of success in content – in terms of Xiaomi innovation or Xiaomi profitability – even though Lei Jun cites content as the ultimate aim of the business model.

By the way, I highlighted his views on “different phones for different crowds” because, as the smartphone market reaches maturity, we are seeing, and will continue to see, attempts to create job-specific or user-specific devices. Apple, as a maker of general-computing devices, has always created smartphones that are asymmetrical to this, because apps and solid all-around hardware allow for a multitude of specialized uses. But other companies, being relatively stronger in hardware than they are in software, find (hope) that this sort of micro-segmentation is a degree of freedom they can exploit.

2. Apple introduces us to the Apple Ring in all its Glory From Jack Purcher, on his site, Patently Apple. Note how often the patent says “in some embodiments”, meaning the device doesn’t have to be a ring. In fact, the patent states the device could have a touchpad or a touchscreen. Some of the use cases appear watch-friendly.

Apple explains that there’s a need for electronic devices with faster, more efficient methods and interfaces for interacting and/or controlling external electronic devices.

Xiaomi has continued its expansion into all-things-consumer with the launch of its MVNO network “Mi Mobile” in China. The first OEM to launch a carrier, Xiaomi’s mobile network is offering 3GB of LTE data for RMB 59 – which is under $10 – if you sign up to a monthly plan.

Xiaomi is “commoditizing its complements”1. It’s likely (re-) selling data at near what it cost to buy it from the carrier (China Unicom). This sort of thing was bound to happen, and it’s no surprise that an OEM that’s focused on smartphone market share above short-term profitability would be the first major OEM to do this. The carrier still gets paid, but other OEMs feel competitive pressure. At least that’s the intent. Let’s see how this fares.

With every ultra-low-margin phone and service Xiaomi launches, the odds that it will excel in any one area (except device unit volume) diminish. How would it fund high performance? One might argue that, with a large installed base, it could profit from selling content and services. The problem, however, is that the quality and demand, and therefore the profitability, of Xiaomi’s content and services remains uncertain. And by “uncertain”, I really mean “average”.

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1. Thanks to Rene Ritchie for ingraining “commoditize your complements” into my head. And, of course, the author of that line, Joel Spolsky. He coined the idea, and other insights, here. Good read.

Insightful article by Eva Dou, for the WSJ, titled Rivals Try to Reinvent Xiaomi Business Model. I think the use of the word “reinvent” is almost meant to be ironic; you won’t find any hint of reinvention from the executives that Dou interviewed. Some nuggets:

In a hint of how quickly Lenovo has worked to develop a Xiaomi rival, Mr. Chang said his team was still figuring out what the [Lenovo brand] name ZUK stands for.

and

One morning this summer, hundreds of young engineers at Wingtech in blue cubicles and humming research stations were busy designing and testing smartphones for clients. Large clients such as Xiaomi and Huawei were cloistered into private rooms, to avoid secrets leaking to rivals. But testing equipment was shared, cutting costs for all the brands.

After reading these passages, what do you think the odds are that any one company’s business model or product will be different than the others’? Low. One alternative path forward: caring about consumers and the technology it takes to build better product experiences. Don’t recall if the executives interviewed used any variation of either word? They didn’t. And that leads us to the prediction:

IHS iSuppli China Research head Kevin Wang said […] “A lot of these smartphone players are probably going to die.”

Basically, some Chinese OEMs hope imitation can lead to differentiation. It won’t.

Google Inc expects to return to mainland China as early as this fall following a five-year absence, tech website The Information reported on Friday.

The company hopes to get Chinese government approval for a China version of its Play store mobile app, The Information reported, citing people familiar with the plan. (bit.ly/1NfthB8)

The tech giant is also planning to extend support of a version of Android for wearable devices in the country, The Information cited one of the people as saying.

China is hard to resist. It’s the biggest smartphone market in the world, in terms of units, and one of the largest, in terms of profit.

If Google does re-enter China, we’ll witness an interesting experiment: a well-funded mobile OS, with minimal app / app store share in this market, attempting to gain a foothold in the midst of thriving local app ecosystems.

If any device OEMs gain (a valid question), who would be most likely? Those without a well-established app ecosystem: Samsung, Huawei, Lenovo. If anyone suffers (again, a valid question), it’ll be a player with an established ecosystem, namely Xiaomi.

2. There is no simple way to switch to a “consumption-driven” economy without the growth rate both falling and staying permanently lower. Structural reforms are absolutely called for, but in this context they represent a surrender to a lower rate of growth and thus they are especially difficult to pull off in a politically sustainable manner.

3. The Chinese have been growing at ten percent or nearly ten percent for about thirty-five years. More than a generation of Chinese is used to treating the risk premium as if they don’t have to worry about it. I shudder to think what economic and also political decisions have been made on that basis

The new store features floor-to-ceiling glass panels and a roof that appears to be intended, at least in part, to allow natural light to filter in from above. It also includes a lighter natural granite facade and a simplified interior layout designed to show off the product tables from the street.

Several excellent Tweets captured highlights from Apple’s earnings call. Some Tweets are metrics-focused, but all these analysts and writers have deep quantitative and qualitative insights. Below are screenshots, to make sure RSS and email readers can see them.

Horace Dediu, who runs and writes Asymco.com, and who also works at the Clayton Christensen Institute (Tweet link):

The relationship between Google and Huawei could be mutually beneficial beyond the phone’s co-development. The Information claims that talks are in progress for Huawei to help Google bring a mobile app store to China, where government regulations have restricted the search giant from conducting much business of note.

Will this be effective? Call me skeptical. (That’s not a knock on Google, by the way. I respect its choice to stay out of China.)

In 2013, Beijing outlined a 2020 goal of having at least three globally competitive robot makers, eight subcontractor clusters, a 45% domestic market share for Chinese high-end robots and a tripling of robot penetration to 100 per 10,000 workers. […]

“We think of [the Chinese as] producing cheap widgets,” but that is not what they’re focused on, said Adams Nager, an economic research analyst… China, he said, is letting industries that rely on lots of manual labor, such as clothing and shoe production, shift out of the country to focus on capital-intensive industries such as steel and electronics where automation is a driving force. […]

One reason China will continue booming is because it has relatively low “robot density,”[…].

At the moment, China has 30 industrial robots for every 10,000 manufacturing workers—about double what it had in 2013.

In comparison, South Korea has the world’s highest robot density at 437 robots per 10,000 manufacturing workers, which is about 15 times greater than China’s. Japan’s is about 11 times greater than China’s; Germany’s is 10 times higher; and the United States’ is about three times higher.

Joshua Vergara, writing for Android Authority, includes a video of an Oppo office and smartphone factory in this article. Both contexts are interesting, especially if you haven’t been to China or seen how smartphones are made. To be clear, I don’t endorse Oppo in any way.

It’s not just the differences of language, history, and culture. It’s not just the (sometimes) questionable economic data, or the paucity of good Chinese academic research until very recent times.

Today’s China is [in a class by itself]. The country has grown so quickly that every decade or so there is a very new China. And so we cannot easily look to the past as a guide. In economic terms, China seven years ago is equally removed from China today as the United States about thirty-five years ago is removed from the United States today, putting recent cyclical factors aside.

You could say that China’s recent past is relatively thin in terms of information. For a more extreme example, how well would we understand an economy which went from zero to fully grown in the span of a week?